In January 2018 the Wolverhampton construction firm Carillion collapsed. It left more than 14,000 people having to look for work elsewhere, and when it was liquidated it had debts of more than £1.5bn. It was also the home of some 420 public sector contracts, including one to build the Midland Metropolitan Hospital in Smethwick.
It was back in 2015 when Carillion was awarded the contract to build the Midland Met. A huge hospital designed to service patients across Birmingham, it was also envisaged to replace some of the services currently provided at the City and Sandwell Hospitals. News came of a capital cost of building the hospital of £297m; there would be 670 beds and 15 operating theatres; there would be an enclosed garden space within the hospital complex; parking would be ample; the hospital would be opened in 2018, and the first patients would come through the doors by the winter of 2018.
The reality at the time of writing is sadly somewhat different. Construction ground to a halt after Carillion’s collapse earlier this year, and has not yet restarted. Concerns have been raised about the effect that the snow in the winter, and the heatwave in the summer, will have had on the skeleton structures in place. The completion date, which had already been pushed back to 2020, now looks more likely to be 2022. The costs of completing the hospital are now expected to top £475m, although it needs to be kept in mind that a new builder has not yet been found and so any current costs estimate needs to be taken with a pinch of salt.
The added cost and delay to this project are amongst the factors which led the government to commissioning a report into how it sources suppliers for completing public sector work. The Public Administration and Constitutional Affairs Committee has now released its report into the situation. The report has found that the government focuses too sharply on cost, and not enough on quality. The bargaining position of the government leads to contracts for services being agreed for a lower price than the services actually cost; this often ends with contracts later being renegotiated for more realistic prices. The chance of a contract not being renegotiated is a significant risk, and the government has been criticised in the report for passing this risk on to contractors.
If the emphasis was on both cost and quality then the risk of contracts not being seen through to completion would surely be lower? In the light of the report’s findings, it is hoped that we see a more holistic approach in the awarding of public sector contracts, and that the Midland Met has a speedy recovery.
Joseph Norton, Head of Compensation